Wednesday, November 3, 2010

Bait and Switch

Bait and Switch

A townhome was originally listed for $179,900 in April 2010 as a short sale.
The price was reduced 11 times until August 16th when the list price was
reduced to $121,530.

I looked at the property and it was beautiful and had good vibes. Three
bedrooms, 3 baths, 2 car attached garage, and a fabulous location without a
lot of similar product. There was a pool and tennis courts and the HOA dues
were on the high side. But there was an on-site property manager who I met.
“Did they tell you about the $7,000 pending assessment for the balcony
replacement?” No, they had not disclosed this.

I submitted comparable sales showing the property was worth $117,000 less
the $7,000 for the balcony. The seller signed my purchase agreement at
$110,000. The lender responded in 2 months, which I'm told is quick for a
short sale. They countered at $127,100 PLUS I had to pay for the balcony,
making the ask price $134,100, $12,570 higher than the list price.

When I asked to see the basis for their number the listing agent told me
they wouldn't reveal it. And whatever market data I submitted would be
ignored. When I asked for a written counter offer, the agent said I had to
write the counter offer, they would not.

My research shows me the top rent would be $1,400 a month, my offer of
$110,000 would cash flow with a little cushion for vacancy, etc. Their
counter offer would require $1,600 a month rent.

Of the dozens of townhomes I've looked at, this is the best one. My friend
and fellow investor cautions me to not fall in love with the property. My
meditation teacher reminds us to not become attached to anything. And he
told us this wonderful story this week.

A king and his minister were hunting and the king goofed with his bow and
arrow and cut off the tip of his thumb.

“All is sweet” said the minister. “Everything happens for a reason, but
sometimes the reason is unclear at the time.”

The king became angry. “What do you mean 'all is sweet', I just lost part of
my thumb and I'm in pain. You're fired.”

“All is sweet”, said the minister and he went home and left the king to

The king encounters a tribe who capture him and feed him delicious food. He
realizes they are fattening him up for some sort of human sacrifice. One of
the tribesman comes to inspect the king and sees the missing thumb tip. “We
have to let you go”, says the tribesman. “Our sacrifices must be perfect”.

Relieved, the king goes home and finds the minister. “You were right”, says
the king. “It was because my thumb tip was cut off that my life was saved.
Now I feel bad about firing you.”

“Don't feel bad” says the minister. “If you hadn't fired me I would have
stayed with you. I'm not missing any body parts and I would have been the

So my deal on the beautiful townhome was not meant to be. And I haven't yet
seen what will be even better. Especially with prices dropping daily.

Whatever your feelings are about this week's election results, remember “all
is sweet”.

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